When politicians, bureaucrats and lawyers rule us . . .

. . . this sort of stupidity happens.

Community activists in St. Louis became concerned a couple of years ago that local banks weren't offering credit to the city's poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators.

Apparently, someone in Washington took notice. The Federal Reserve has cited one of the group's targets, Midwest BankCentre, a small bank that has been operating in St. Louis's predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas.

. . .

At the Justice Dept., a new 20-person unit dedicated to fair lending issues received a record number of discrimination referrals from regulators in 2010 and has dozens of open cases, according to a recent agency report. Potential penalties can reach into the millions of dollars. "We are using every tool in our arsenal to combat lending discrimination," Thomas E. Perez, the assistant attorney general for the Civil Rights Div., told a conference of community development advocates in Washington in April.

To some banks the crackdown has come as a surprise, say consultants and lawyers representing financial institutions in discussions with regulators. Like Midwest BankCentre, some lenders are being cited for failing to operate in minority and low-income census tracts near their branches, even when they have never done business there before. "If you put your branches only in upper-income areas, the regulators are not accepting that anymore," says Warren W. Traiger, a lawyer at BuckleySandler in New York, which advises banks on fair lending issues.

. . .

Bank lobbyists say the stepped-up government scrutiny could backfire if financial institutions decide to shrink their operations rather than yield to pressure to do business in areas that don't make sense for them.

There's more at the link.

A few points to note:

1. Mr. Thomas E. Perez, mentioned in the article, has a track record in civil rights matters that tilts far to the left of center.
2. The St. Louis Equal Housing and Community Reinvestment Alliance lists one of its goals as to "ensure that entitlement jurisdictions are meeting their obligations to affirmatively further fair housing". Note the key words: entitlement . . . obligations . . . fair. The only 'entitlement' they're interested in is their entitlement to money, not the banks' entitlement to make loans to credit-worthy customers who are likely to repay them. The only 'obligation' they're interested in is to oblige others to lend them money - but I doubt very much whether they'd feel equally obliged to repay the loans. The only 'fairness' they're interested in is what they consider to be fair - not what any objective, independent observer would consider fair and reasonable. Can you say 'left-wing Democratic-Party-machine front organization'? I thought you could.
   
3. One of the causes of our current financial crisis is the collapse of the US property market. One of the reasons for that collapse is that banks were forced to lend to customers who, under normal circumstances, would not be credit-worthy. In exchange for their acquiescence in such 'forced lending', the banks were allowed to 'securitize' these untenable mortgages and sell them to investors. The collapse of this financial house of cards triggered our current economic woes . . . and now the Feds want to force the banks to start doing the whole damn thing over again!?!?!? Clearly, they've never read Einstein's definition of insanity . . .

So a bank which has never opened a branch in an area where potential customers are likely to be less credit-worthy (which would put its money, and the savings and investments of more credit-worthy customers at risk), is now to be forced to do so, and lend money to these potentially risky clients, on the grounds of 'political correctness' and/or 'redlining' and/or 'discrimination'. This, from a Federal government that couldn't even make a profit running a brothel!

Is it any wonder our economy isn't improving?





Peter